As expected, Punjab Finance Minister Upinderjit Kaur presented a tax-free Budget in the election year in the state Assembly today. The state is heading for Assembly elections in February 2012. The finance minister presented a revenue deficit of Rs 3,379 crore (Budget Estimate) for 2011-12 as against revised estimates of Rs ,3705.2 crore for 2010-11. Kaur stated that the deficit would be met by borrowings and growth in state taxes, which is being projected at 17.3 per cent this financial year.
It is worth mentioning that the state has been passing through a dismal fiscal situation for the last many years as revenue expenditure continues to outstrip revenue receipt, resulting in large revenue and fiscal deficits and cash flow problems. Presenting the Budget, Kaur mentioned the steady decline in relative share of the state in Central taxes over a period of time had further compounded the debt problem of the state. As stated before, the share of Punjab in horizontal distribution of Central taxes has dwindled from 2.5 per cent under the Fifth Finance Commission (1970-75) to 1.4 per cent under the 13th Finance Commission (2010-15). Also, giving tax concessions to the hilly states has been responsible for the shifting of manufacturing units out of the state and consequent adverse impact on the economy and tax revenue of the state. Also, the implementation of the pay commission involves additional liability of Rs 3,000 crore and Rs 7,200 crore for payment of arrears. All these problems have aggravated the debt problem of the state. The total outstanding debt of the state, which was only Rs 879 crore (17.5 per cent of GSDP) at the end of 1980-81, had ballooned to Rs 6,870 crore (36.4 per cent of GSDP) at the end of 1990-91. The revised estimate for debt by the end of 2010-11 will be Rs 69,549 crore (30.4 per cent of GSDP) and is likely to be Rs 77,585 crore (30.4 per cent of GSDP) at the end of 2011-12. The mounting debt burden has resulted in the increasing liability of servicing debt.
The fiscal deficit for the state is likely to be Rs 8,801.3 crore (3.5 per cent of GSDP) for 2011-12 as against Rs 7,188.7 crore for 2010-11(RE). The additional deficit has been on account of higher capital expenditure.
She added that despite the tax resources of the state showing buoyancy, inadequate transfer of resources from the Government of India, as already mentioned, had adversely affected. To meet the hiatus between the revenue receipts and revenue expenditure and to fund its development programmes the state had to rely upon disciplined borrowings to augment its resources. She added, “We are eyeing a growth rate of 17.3 per cent in state’s own revenue and expects it will touch Rs 20,407.7 crore in 2011-12 from Rs 17,395.7 crore.”
She mentioned, “In order to solve the fiscal mess, I have written to the Union Finance Minister Pranab Mukherjee to waive off fully, in the first instance, the National Small Savings loans given to the state. If it is not found feasible, then kindly extend help in the form of resettling the effective rate of interest on National Small Savings Loan at four per cent per annum and also to reschedule all the outstanding loans for a further period of 30 years. To increase the state’s share in Central taxes to 50 per cent in modification of the report of the 13th Finance Commission. Also to waive-off the entire outstanding Central term loan which was Rs 3,286.4 crore as on March 31, 2010, and also to increase the current year’s (2010-11) borrowing limit of the state by Rs 1,000 crore, which is presently Rs 6,586 crore.”
She also mentioned on the floor of the house that nothing has been heard from the Central government on the subject so far.
